ISTANBUL: Turkish inflation fell in December to its lowest year-end level since central bank price targeting began but pressure on core prices increased, limiting the bank's room to ease monetary policy further.
The consumer price index rose 6.16 percent year-on-year, its lowest in 15 months and down sharply from 10.45 percent a year ago, Turkish Statistics Institute data showed on Thursday.
"Inflation was in line with central bank expectations and it will not cause a change in the central bank's policy stance," said Haluk Burumcekci, an economist at EFG Istanbul Securities.
The bank began targeting inflation in early 2006 following decades of double-digit price increases, soaring to 68 percent in 2001 after a massive depreciation of the lira.
The previous lowest year-end inflation figure under the new regime was 6.4 percent, in 2010.
But core inflation - which excludes food, energy, alcohol, tobacco and gold - inched up to 5.8 percent from 5.7 percent in November, leaving the central bank little room to cut interest rates more aggressively.
"The picture we have at hand is a domestic demand-driven acceleration in economic activity with little to cheer on the core inflation front," said Inan Demir, an economist at Finansbank.
Turkey's central bank has been performing a delicate balancing act based on interest rate differentials and money supply management to try to reinvigorate slumping domestic demand while taking measures to prevent loan growth from getting out of control and stoking inflation.
It eased policy in the second half of 2012 to support the economy, which had been the fastest-growing in Europe in 2011, expanding by 8.5 percent, but slowed sharply in 2012 as domestic demand weakened.
Last month it cut its main policy rate for the first time in more than a year.
The bank holds its next policy meeting on Jan 22.
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